Different business and organizational models exist. Even with this fact, most businesses are organized in a traditional, hierarchical way. Hierarchical organizations exist to establish order. Most business executives want order, although chaos and uncertainty appear often. While business leaders say they want higher employee engagement, the traditional models have stumbled. With more than one way to organize a business, why don’t we see other models used more?
Other business models exist. Many of them distribute power and decision-making throughout the organization. Different business models can create more activating dynamics for individuals and teams within companies and organizations. In the current season of the Activate World podcast, we are exploring these different models. Let’s review a snapshot of some of these organizational and business models.
Holacracy is a way of structuring and running organizations that replaces the conventional management hierarchy. Instead of operating top-down, power is distributed throughout the organization, giving individuals and teams more freedom to self-manage, while staying aligned to the organization’s purpose.
Key Elements of Holacracy
- Employees have roles instead of job descriptions. Each individual can hold multiple roles at any given time. A role follows a clear format including a name, a purpose, optional domains to control, accountability, and ongoing activities to perform.
- The various roles in an organization are structured in a system of self-organizing (but not self-directed) circles. Circles are organized hierarchically, and a broader circle assigns each circle a clear purpose. However, each circle has the authority to self-organize internally to best achieve its goals.
- Each circle uses a defined governance process to create and regularly update its roles and policies. Holacracy specifies a structured process known as “integrative decision making” for proposing changes in governance and amending or objecting to proposals.
- Holacracy specifies a tactical meeting process for every circle that typically happens every week. This process includes different phases to report on relevant data, share updates on projects, and open discussions where any circle member can add to the agenda
- AIMMS, supply chain analytics
- ARCA, cash automation and recycling solutions
- Convert.com, software
- Zappos, retail
More information at Holacracy.org.
A cooperative is an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically controlled enterprise.
There are five different types of cooperatives including:
- Consumer: owned by consumers who buy goods or services from their cooperative
- Producer: owned by producers of commodities or crafts who have joined forces to process and market their products
- Worker: owned and democratically governed by employees who become co-op members
- Purchasing: owned by independent businesses or municipalities to improve their purchasing power
- Hybrid: a combination of co-op types, where people with common interests band together.
Key Elements of Cooperatives
- Voluntary and open membership: Cooperatives are voluntary organizations, open to all persons able to use their services and willing to accept the responsibilities of membership, without gender, social, racial, political or religious discrimination.
- Democratic member control: Cooperatives are democratic organizations controlled by their members, who actively participate in setting their policies and making decisions.
- Member economic participation: Members contribute equitably to the capital of their cooperative. A part of the capital is usually the common property of the cooperative.
- Concern for community: Cooperatives work for the sustainable development of their communities through policies approved by their members.
- Consumer cooperative – Recreational Equipment Inc. (REI)
- Producer cooperative – Land O’ Lakes
- Worker cooperative – Isthmus Engineering & Manufacturing (IEM)
- Purchasing cooperative – U.S. Communities Government Purchasing Alliance
More information is available at the Democracy at Work Institute and the International Co-operative Alliance.
Millions of Americans already have an ownership stake in their workplace. More than 7,000 U.S. companies are owned wholly or in part by their employees. Between 1,600 and 4,400 of these companies are majority employee-owned. These employee-owned businesses are more connected to their communities, better for their workers, and are measurably more stable and productive than traditional investor-owned corporations. They represent the beginning of a new kind of economy based on broad-based prosperity, limited wealth inequality, and a shared sense of ownership of and responsibility for our communities and workplaces.
Key Elements of Employee-owned Businesses
- The main vehicle for broad-based ownership in the U.S. is the employee stock ownership plan (ESOP). An ESOP is a type of retirement plan that invests primarily in company stock and holds its assets in a trust, in accounts earmarked for employees. Plan participants do not directly own the stock and are, for the most part, paid out after they leave the company.
- The other main category of employee ownership is equity compensation, which refers to a grant of stock or its equivalent from the employer. A stock option plan grants employees the right to buy company stock at a specified price during a specified period once the option has vested.
- An employee stock purchase plan (ESPP) resembles a stock option plan. It gives employees the chance to buy stock, usually through payroll deductions, and most often at a discount. Restricted stock plans grant or sell employees stock that they can possess only once certain restrictions (such as vesting) are met. A company may also offer an unrestricted direct grant of shares.
- Penmac, 100 percent employee-owned
- Publix Super Markets, more than 50 percent employee-owned
- WinCo Foods, which is more than 50 percent employee-owned
More information is available at the National Center for Employee Ownership.
Sociocracy is a socially responsible system of governance that originated in The Netherlands. Originally envisioned in 1945 by Kees Boeke, a Dutch educator and pacifist, as a way to adapt Quaker egalitarian principles to secular organizations, sociocracy allows us to give and receive effective leadership while remaining peers.
Key Elements of Sociocracy
- Consent decision-making: Policy decisions are made by consent, which differs slightly from consensus. In consensus, everyone is trying to find agreement, often trying to find common ground for their preferred outcome. In consent, we shift our energy towards finding common ground that is safe to try and that no member has an objection to.
- Election of Persons: Election of persons for functions and/or tasks takes place by the principle of consent and after open argumentation.
- Small group mandate: All members of a governing body are organized in circles. Those circles have full authority in their domain. All decisions are made on the most local level possible.
- Linked circles: Whenever there are two related circles, two members will be full members of both circles. That way, information can flow easily, and no group can over-power the other.
- All decisions in Sociocracy are dynamic, including the organizational structure.
Source: The Ostrom principles and Sociocracy.
More information on Sociocracy is available at Sociocracy for All.
Time for a New Business and Organizational Model
More businesses are working to find a better way to address employee engagement, pay equity, and community involvement. Many of the models mentioned above put these elements in the center of the business. Profitability is still important, but purpose, ownership, community, and diversity carry significance too. Leadership and team development challenges still exist. However, the resolution of the challenges is a team and community effort.
Is it time for new business and organizational models? Probably.
Listen to Season 5 of the Activate World podcast, underway now. You can listen on your favorite podcast platform at your convenience. Take the first step of leading as an Activator by being informed on current business and society issues through our weekly Activators Newsheet.
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More than One Way to Organize a Business